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ITC sees huge potential for U.S. food exports to Cuba
CubaNews / May 2009

By Larry Luxner

If average American tourists were allowed to visit Cuba freely, and current financing restrictions on selling food to Cuba were lifted, the U.S. share of Cuba’s total $1.85 billion food import market would jump to be-tween 49% and 64%, up from the current 38%.

That translates into anywhere from $925 million to $1.2 billion in U.S. food sales — a significant increase over the $707 million worth of agricultural commodities that was actually sold last year, says Jonathan Coleman of the U.S. International Trade Commission.

“This model assumes lifting of all restrictions on U.S. travel to Cuba,” he said. “We predict 500,000 to one million Americans would travel there each year. It also assumes the removal of all financing restrictions.”

Coleman, chief of the ITC’s agriculture and fisheries division, spoke at an Apr. 29 conference at Washington’s National Press Club on the subject of U.S. farm sales to Cuba. He said his latest data is derived from an earlier 2007 ITC study carried out at the request of Sen. Max Baucus (D-MT), who this week plans to re-introduce a bill that would facilitate U.S. food sales to Cuba and make it easier for farmers to visit the island.

“We conducted 40 interviews with interested parties. We talked to many large and small U.S. companies trading with Cuba, and I traveled to Havana for a week, and we interviewed Alimport officials, port personnel and others to get a Cuban perspective,” explained Coleman, stressing that the ITC is an independent federal agency funded by Congress but not part of the administration.”

“We tried to see what our trade would have been in 2008 absent the restrictions. So everything is pegged to what actually happened. If we just talk about Cuban-American travel, then the additional numbers of visitors would be much lower, so the effects would be a lot smaller. These are very rough numbers.”

Thanks to the Trade Sanctions Reform and Export Enhancement Act (TSRA), which allows U.S. farmers to sell food to the Cuban government on a cash-only basis, Cuba now sources 100% of its corn and soybeans, 80% of its poultry and nearly half of its wheat and pork products from the United States.

Yet the numbers clearly show room for im-provement, which would come at the expense of major competitors such as Canada, Brazil, Vietnam and the European Union.

Dan Griswold is director of trade policy studies at the Cato Institute, a nonprofit think tank with strong libertarian leanings.

He noted that from dead last 10 years ago, Cuba now ranks sixth in Latin America in U.S. farm imports.

“Last year, we sold more food to the 11 million people of Cuba than to the 200 million people of Brazil,” he said. “U.S. farm exports could increase by another $250 million if we eased up on some of those restrictions, putting the total close to $1 billion.”

Griswold added: “I don’t want American taxpayer dollars subsidizing trade to Cuba, but I also don’t want our government interfering with normal trade. Just let private banks finance transactions and assume all the risks.”

Griswold, who noted that the embargo “has impoverished Cubans without making them one bit more free,” said Congress and the Obama administration must act now to scrap current Cuba policy. He noted ironically that Republicans generally support trade agreements and Democrats generally oppose them — except when it comes to Cuba.

Coleman said that requiring Alimport to buy letters of credit through European banks and requiring cash payment before shipment makes U.S. farm products 2.5% to 7% more expensive than if Cuba, like all other buyers, were able to use normal banking channels.

Alan Tracy, president of U.S. Wheat Associates, said the Bush administration’s impositions of financing restrictions “severely damaged” the commercial relationship that U.S. wheat exporters had built up with Alimport.

But his criticism isn’t limited to Bush.

“We are very disappointed that the Obama administration did not include anything on the cash-in-advance issue. We would also like to see the travel restrictions lifted,” he said. “Over time, piece by piece, we can rebuild some confidence. If Cuba cannot rely on the U.S., they are simply not going to put themselves in the position of depending on us.”

Tracy said the draconian restrictions on selling to Cuba have cost U.S. wheat farmers over $700 million in lost sales since 2000.

“We’re easily talking $100 million per year in sales that we’re foregoing by not having open trade, and that’s just the wheat industry,” he said. “It’s not a big deal when compared to total U.S. wheat exports of $6 billion, but it is significant to our farmers.”

Betsy Ward, president and CEO of the USA Rice Federation, said her group represents rice growers in Arkansas, California, Louisi-ana, Mississippi, Missouri and Texas. Togeth-er, these six states produce 19 billion lbs. of rice a year, about 50% of which is exported.

“If you could create an ideal market for U.S. rice, it would be Cuba,” she said. “Rice is a staple of the Cuban diet, and Cuba has the highest per-capita consumption of rice in the Western Hemisphere, about 150 lbs. annually. But it only produces 5% of its rice. So to make up that difference, Cuba imports 600,000 tons of rice a year, making it one of the world’s best rice importers.”

Before the revolution, Cuba was the top buyer of U.S. rice, though nothing was sold between 1961 and 2000. After TSRA’s passage that year, U.S. rice producers again began exporting to Cuba, reaching 176,000 metric tons in 2004, or 30% of Cuba’s total rice imports.

But after financing restrictions were tightened, Cuba turned to Vietnam, causing U.S. rice exports to fall until last year, when only 12,000 tons of American rice were shipped to Cuba.

“Competition from Vietnam took us out of the market,” said Ward. “But with open, fair trade, Cuba would quickly be our No. 2 export market after Mexico. That would translate into $180 million to $360 million in rice sales. This is why we’ve been very involved for the last 15 years in calling for an end to the embargo. Resuming normal commerical relations with Cuba is a top priority for our organization.”

The ITC’s Coleman said “we can supply smaller volumes of individual shipments on a just-in-time basis to smaller Cuban ports. That’s especially attractive to Cuba, with its lack of storage capability and transpor-tation infrastructure. This works very much in our favor.”

Yet, says Coleman, “our exporters are prohibited from offering credits, while several of our competitors are making major trade concessions” like Brazil, Vietnam and the 27-member European Union — which have moved rapidly to fill the void.

“U.S. companies with small sales volumes are leaving the market because of these transaction costs, the costs of storage and the fact they do not have established relationships with appropriate foreign banks.”

Coleman said “we were told that sales of seeds and table potatoes from North Dakota were thwarted by complications relating to Cuban phytosanitary experts unable to travel to the United States. Beef is not imported be-cause the Cubans cannot inspect our meat-processing facilities.”

Rosemarie Watkins, director of public policy at the American Farm Bur-eau, praised Obama’s policy changes but said “these actions really do not go far enough from our standpoint, and we hope to see further liberalization.”

U.S. agriculture sales to Cuba have averaged $400 million annually since 2000, she said. “With the embargo lifted, we expect that to rise to $1 billion. We believe we should allow unrestircted travel. We should also allow direct banking, eliminate third-country banking requirements and allow Cuban inspectors into the United States.”

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